TaxTMI 
TaxTMI 
2023 (8) TMI 199
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....cates i/b. M/s. K. Ashar & Co. ORDER PER : JUSTICE TARUN AGARWALA, PRESIDING OFFICER 1. Two appeals have been filed against an ex parte ad interim order dated June 12, 2023 passed by the Whole Time Member ("WTM" for short) of the Securities and Exchange Board of India ("SEBI" for short) wherein the following interim directions were issued:- a) The Noticees shall cease to hold the position of a director or a Key Managerial Personnel in any listed company or its subsidiaries until further orders. b) ZEEL shall place this order before its Board of Directors, within 7 days from the date of receipt of the Order. 2. The appellant Punit Goenka is the Managing Director and Chief Executive Officer of Zee Entertainment Enterprises Ltd. ("ZEEL" for short) since January 1, 2010. Subhash Chandra was the then Chairman of ZEEL at the relevant moment of time when the alleged violation occurred and at the present moment is the Emeritus Chairman of ZEEL. 3. The facts leading to the filing of the present appeal is, that in November 2019 two independent directors of ZEEL resigned after raising concerns over several issues and one such issue was appropriation of a fixed....
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....h a reply was given on June 11, 2023 and thereafter the impugned ex parte ad interim order was passed. 7. While passing the ex parte ad interim order directing the appellants that they would cease to hold any position of a director or a Key Managerial Personnel in any listed company or its subsidiaries till further orders, it also directed the appellants to file their reply / objections, if any, within 21 days. Instead of filing a reply the appellants have chosen to prefer this appeal before this Tribunal. 8. We have heard Shri Janak Dwarkadas, the learned senior counsel with Shri Pesi Modi, senior counsel, Shri Somasekhar Sundaresan, Shri Kunal Katariya, Shri Nitesh Jain, Ms. Shruti Rajan, Shri Anubhav Ghosh, Shri Vivek Shah, Ms. Vatsala Kumar, Shri Harishankar Raghunath, Shri Zerrick Dastur, Ms. Smriti Singh, Shri Kushil Shah, Shri Jitendra Motwani and Shri Manendra Singh, the learned counsel in respective appeals and Shri Darius Khambata, the senior counsel with Shri. Aditya Mehta, Ms. Vidhi Shah, Shri Jayesh Ashar, Shri Mihir Mody, Shri Arnav Misra and Shri Harshvardhan Melanta, the learned counsel for the respondent. 9. The contention of the learned senior counsel was....
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....directions issued in the impugned order has caused undue prejudice and irreparable harm to the appellants and is also disproportionate to the alleged violations. In support of the submissions the learned senior counsel placed reliance upon a decision of this Tribunal in Zenith Steel Pipes and Industries Limited vs SEBI, Appeal no. 554 of 2021 decided on February 21, 2023. 16. It was contended that the prima facie case made out on the basis of bank statements was wholly erroneous as no reasonable person could arrive at a finding that the entries in the bank statements are fictitious or sham or bogus book entries. 17. In the end it was urged that the impugned order is not only arbitrary but is also punitive which cannot be permitted. It was therefore urged that the impugned order should be set aside and the appeal should be allowed. 18. On the other hand, the learned senior counsel for the respondent contended that the charges are serious and based on the investigation made on the basis of the replies submitted by the appellants on May 8, 2023 the ex parte ad interim order was passed on June 12, 2023. It was urged that there was no delay on the part of the respondent in pass....
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....ies at some length, we find that the power to pass ex-parte ad interim order, pending investigation, flows from Section 11 and 11B of the SEBI Act. A plain reading of Section 11 and 11B shows that SEBI has to protect the interests of the investors in securities and to regulate the securities market by such measures as it thinks fit and such measures may be for any or all of the matters provided in sub-section (2) of Section 11 of the Act. SEBI has power to pass an interim order and such interim order can also be passed ex parte in order to prevent further possible mischief of tampering with the securities market. If during the course of investigation, it is found prima-facie, that the person is violating the securities laws or is siphoning of the funds of the listed company to the detriment of its shareholders, it would be obligatory for SEBI to pass an interim order or for that matter an ex parte ad interim order in order to safeguard the interests of the investors and to maintain the integrity of the market. 23. Normally, while passing an interim order, the principles of natural justice has to be adhered to, namely, that an opportunity of hearing is required to be given. Proce....
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....esidual, core natural justice sufficient to enable the affected person to make an adequate representation (These considerations may not, however, apply to cases of liquor licensing which involve the grant of a privilege and are not a matter of right; See Chingleput Bottlers v. Majestic Bottling Company. That may be and in some cases it can only be after an initial exparte interim order is made." 32. Thus, it is a settled position that while ex parte interim orders may always be made without a pre decisional opportunity or without the order itself providing for a post decisional opportunity, the principles of natural justice which are never excluded will be satisfied if a post decisional opportunity is given, if demanded. In the present case the order of 12-3-2001 itself provided a post decisional hearing on 21-3-2001. The same was availed of by the petitioners. At the post-decisional hearing, full opportunity was given to them to produce evidence and documents and the ex parte order was confirmed only after considering the submissions made by them. In these circumstances, the plea of Dr. Singhvi that there was violation of principles of natural justice, cannot be accepted.....
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.... 26. Considering the aforesaid we find that in the instant case the WTM has found that the related entities of ZEEL had defaulted in the repayment of the loan taken by them, as a result of which, the fixed deposit given by ZEEL was encashed by the Bank. The related entities alleged that the money was eventually repaid to ZEEL along with interest. In this regard, the details of the payment was sought by SEBI and the information supplied by ZEEL led to a further enquiry which showed prima facie a round tripping of the funds by ZEEL. It was found in paragraph 13, 16, 19, 22 and 25 of the impugned order that the funds originated from ZEEL and listed companies of Essel Group and ultimately through multiple layers the funds travelled back to ZEEL within 2 to 3 days. This evidence based on bank statements prima facie led to a conclusion that there has been a siphoning of the funds of the listed company through related entities and which is to the detriment of the shareholders and the investors. 27. These bank statements made the WTM to observe prima facie that there has been a siphoning of the funds and round tripping of the funds from ZEEL to ZEE through related entities. 28. Th....
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.... the fact that one of the entities, namely, Pen India Ltd. which according to the appellants is not a related entity, we are of the opinion that the appellants should file an appropriate reply for vacation / modification of the impugned order dated June 12, 2023. We do not find any reason to interfere in the impugned order at this stage and we dispose of the appeals directing the appellants to file a reply / objection along with a stay vacating application to the ex parte ad interim order dated June 12, 2023 within two weeks from today. The WTM will fix a date for hearing within a week from the date of filing the reply by the appellants and the WTM will pass appropriate orders within two weeks thereafter after giving the appellants an opportunity of hearing. 33. It is made clear that all arguments raised before this Tribunal will remain open to the appellants to raise the same before the WTM which will be considered and appropriate orders would be passed by the WTM. The WTM will also take into consideration the proportionality of the directions given in the impugned order vis-à-vis the alleged violation. 34. We also make it clear that any observation made by this Tribu....